NEW DELHI: Amid the hostility in the Bimal Jalan committee over the optimum level of reserves or excess capital that the RBI should hold, the central bank was expected to transfer around Rs 66,000 crore to the Centre, including Rs 8,000 crore of “surplus reserves”.

This was far lower than the Rs 90,000 crore that had been budgeted for during the current fiscal year, when government finances are already strained. Naturally, Subhash Chandra Garg, the then finance secretary and the government nominee on the panel, was not happy. But given the unyielding position he had adopted, the committee members were not willing to show much flexibility. Despite the public posturing, his relationship with the RBI was already strained.

His removal from the coveted job seemed to have helped matters as finance secretary Rajiv Kumar managed to soften the committee members and got the RBI central board to part with a record dividend and also transfer “excess provisions” of Rs 52,637 on Monday itself. These two put together add up to over Rs 1.76 lakh crore – 2.7 times the original estimate – which may turn out to be the bonanza that the government was looking for.

What also helped matters was a change of guard at the department of economic affairs (DEA), where Atanu Chakraborty has replaced Garg, who was designated finance secretary as he was the senior most bureaucrat across the five departments of the finance ministry.

Initially, the RBI central board was only expected to take note of Jalan committee’s recommendations and release them for public comments. At Monday’s board meeting, directors such as Tata Sons chairman N Chandrasekaran, TeamLease chairman Manish Sabharwal and RIS chief Sachin Chaturvedi had questions over the range that has been suggested. Similarly, some of the board members had queries over how the RBI and the government had managed to bury their differences over the last eight months, which were mainly responded to by deputy governor N S Vishwanathan.

After Garg’s ouster, the Centre’s revised pitch before the committee was to agree to a level of reserves that completely covered the risks during a turmoil in the financial, forex and money markets. So, it agreed to adopt a new methodology to cover 99.5% of RBI’s market risk against 99% that is acceptable to many other central banks.

The committee also agreed to have a contingent risk buffer for a “rainy day” as a cover for a monetary or financial stability crisis and pegged it at 5.5-6.5% of the RBI’s balance sheet size.

Based on the current balance sheet size, RBI’s excess provisioning was estimated at Rs 11,608 crore at the upper band and Rs 52,637 crore at the lower end, and the board decided to opt for the latter. When it came to the transfer of surplus, or dividend to the government, the board recommended that the central bank’s entire net income of Rs 1.23 lakh crore for 2018-19 could be transferred.

While the RBI and DEA under Garg may not have shared the best of relations, when it comes to the department of financial services (DFS), which is headed by Kumar, there was little unpleasantness. After the tussle with Urjit Patel, the RBI and DFS had agreed to sort out at least three contentious issues – easier rules for MSMEs, relaxing norms for stressed banks and postponing the implementation of the capital buffer for banks that was putting pressure on them.